ECJ - Recent Developments in Direct Taxation 2012

S. 53Germany I: Kronos International, Magdeburger Mühlenwerke, Commission vs. Germany I-III

S. 551. Kronos International (C 47/12: cross-border dividends)

1.1. Introduction

The Kronos International case belongs to the family of cross-border dividend cases dealing with the old German imputation system, which was replaced in 2000/2001 by the “half-income procedure”. It is, however, not “just another Meilicke case”. Unlike in the two Meilicke cases, which also have been submitted by the Tax Court of Cologne, in Kronos International the recipient of the dividend is another company rather than an individual. At the time of the case at hand Germany applied a split system for intercompany dividends to avoid economic double taxation: Dividends from domestic corporations were fully taxed in the hands of the receiving corporation, but the corporate income tax paid by the distributing corporation was credited against the tax liability. In contrast, dividends from a foreign corporation were tax exempt in the hands of the receiving corporation. This raises the question whether the Manninen/Meilicke doctrine that the resident country applying an imputation system has to also grant credit for foreign dividend...